Poland first in Europe to issue Chinese 'Panda bonds'

Poland on Thursday said it became the first European country to issue government bonds on the Chinese market, opening the door to new sources of financing as Warsaw plans to run a record deficit next year.

The Polish finance ministry said it had issued three-year bonds worth three billion yuan (400 million euros, $451 million) and denominated in the Chinese currency, also revealing in a statement that earnings "were swapped into euros".

"After securing the necessary permission from Chinese regulators, we became the first European country to issue Polish bonds on the Chinese market," a Polish finance ministry statement said.

The move comes after the Polish populist-oriented rightwing Law and Justice (PiS) government said Monday it would raise spending next year to just under an EU-wide limit of 3.0 percent of GDP, while also cutting growth forecasts for central Europe's largest economy.

"Emitting bonds on the Chinese market was aimed above all at diversifying our investor base and acquiring financing to cover this year's loans," the finance ministry added.

The PiS won an October 2015 election on promises of generous social spending -- including a universal child benefit scheme -- raising concerns it could bloat Poland's moderate public debt.

The ministry pegged the 2017 deficit at 2.9 percent of GDP in a Monday statement, or 59.3 billion zloty (137 billion euro, $156 billion).

The figure totals around five billion zloty more in deficit spending over 2016, Poland's Puls Biznesu financial daily reported.

The ministry also dialled down its growth estimate for 2017 from 3.9 percent to 3.6 percent, with average annual inflation set to hit 1.3 percent. It also revised its growth forecast for this year to 3.4 percent, down from 3.6 percent.

The IMF said in July it expected spending to increase "the budget deficit to 2.8 percent of GDP in 2016 and to over 3 percent of GDP in 2017", compared to 2.6 percent in 2015, before a planned return to fiscal consolidation from 2018.

It also said growth would accelerate to 3.7 percent in 2017 from an estimated 3.5 this year, thanks to "strong private consumption supported by the new child benefit scheme, before moderating over the medium term".

Chinese President Xi Jinping visited Poland in June.